Study Guides (248,356)
Canada (121,501)
Economics (462)
ECON 1B03 (154)
Final

EXAM REVIEW.doc

6 Pages
84 Views
Unlock Document

Department
Economics
Course
ECON 1B03
Professor
Hannah Holmes
Semester
Winter

Description
ECON 1B03 EXAM REVIEW OPPORTUNITY COST = what you give up to get something else - the best forgone alternative EXAMPLE: To get 3 CDs, give up 1 DVD To get 1 CD, give up 1/3 DVD => Opp. Cost of a CD is 1/3 DVD COMPARATIVE ADVANTAGE = you have it if your opp. cost of producing a good is lower than someone else’s => specialization and gains from trade ABSOLUTE ADVANTAGE = your economy is more productive in all goods CHANGE IN DEMAND = shift of the demand curve due to a change in income, taste, population, prices of related goods, expectations CHANGE IN QUANTITY DEMANDED = movement along the demand curve due to a change in the price of the good CHANGE IN SUPPLY = shift of the supply curve due to a change in production costs, number of firms, expectations, prices of related goods produced CHANGE IN QUANTITY SUPPLIED = movement along the supply curve due to a change in the price of the good NORMAL GOOD = when income increases, demand increases INFERIOR GOOD = when income increases, demand decreases ELASTICITY = measures the responsiveness of quantity of a good demanded (or supplied) to a change in: - price of the good - income - if positive, normal good - if negative, inferior good - price of a related good - if positive, goods are substitutes - if negative, goods are compliments Elastic = highly responsive, | E | > 1 Inelastic = not very responsive, | E | between 0 and 1 (fraction) If a good is inelastic, an increase in price => increase in TR If a good is elastic, an increase in price => decrease in TR FIXED COSTS -do not vary with output VARIABLE COSTS -depend on quantity produced MARGINAL PRODUCT OF LABOUR = change in Q change in labour AP intersects MP when AP is at its maximum. Total Product Q is maximized when MP = 0. SOME COST AND REVENUE RELATIONSHIPS: TC = TFC + TVC ATC = AFC + AVC MC = change in TC change in Q TR = PQ MR = change in TR change in Q PROFIT = TR – TC and PROFIT = (P – ATC)Q Any profit-maximizing firm will produce Q such that MR = MC. PERFECT COMPETITION (COMPETITION) -many firms -homogeneous goods -firms are price takers -free entry or exit -P = MR = AR = D -firms max profit where P = MC since P = MR -supply curve is MC above min AVC -SR temporary shutdown if P < minAVC -LR exit if P < minATC; entry if P > min ATC Example: Market price is P = $70 Firm’s MC = 30 + 2Q 2 Firm’s TC = 30Q + Q Set P = MC 70 = 30 + 2Q Q = 20 Firm’s profit = TR – TC
More Less

Related notes for ECON 1B03

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit